KHC - Earnings call transcript Q1 2022 | The Kraft Heinz Company

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Kraft Heinz Company first quarter results question-and-answer session. I'd now like to turn the call over to your host, Chris Jakubik.

You may begin.

Chris Jakubik

Thank you, and hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at the Kraft Heinz Company, and welcome to our Q&A session for our first quarter 2022 business update.

we how some we today, are statements remarks on based see our will forward-looking make that During things today. differ in and may they SEC. results due and risks Actual uncertainties, are discussed filings our our release earnings with the to and

some and also measures financial reconciliations together And supplemental GAAP should these be discuss call, be considered you today should results. the non-GAAP financial read within measures ir.kraftheinzcompany.com. We release not the GAAP can a and and non-GAAP posted will materials during non-GAAP earnings replacement to find for our with the at

Before hand quick CEO, opening our I'm we few Miguel begin, going it over comments. a to Patricio, for to

Miguel Patricio

just disruption, deliver thank years We've truly our And that same by they to and continue the start lot to are proud the of for we seen company work our a Well, would building advantage sharing X address continue at they time our short-term people. long-term our Chris. transformational of challenges, you, of company. the successfully brands. to the like I I how am of and

a platforms, delivered markets. top the We growth year, with both our on start and and bottom teams Our line. for line remain from coming strongest brands, strategy strong channels priority the on

We continuing improving are effectively efficiencies. our managing our while gain to inflation, incremental supply constraints,

plans like business to Energize platforms. make joint and agile, more becoming becoming unlocks areas retail accelerate to marketing, in much and in developing capacity continue We creative Grow advantages progress, building initiatives and and our our more in foodservice deploying between

think to questions. a let's with Heinz equipped cutting-edge very It to our Kraft your could technology seeing, take exciting well, redefine value a we are chain. on promises and accelerate As best-in-class challenging this our innovators time and and doing strategic better now don't you partnerships across momentum through are our very remain environment. for that, what is through transformation clients With be I to build we

Operator

Lazar Andrew with from comes question first Our Barclays. Instructions] [Operator

Andrew Lazar

Chris, related the seen to appreciate for forward X ramp which there many all the opportunity there you elasticity guess, around congratulations over be? could inventory quantify. you you I years My from of be are to they an versus up here? to opt much it. past really should how more exceed hold I help dislocations? guess, be the than this And may rebuild a during too bit is dynamic, well, consumption going more any how where to to supply the there can somewhat And are be might going want I is regarding that inventory. forward currently -- question pre-pandemic, problematic having you. offset, out retailers to retail for did inventory shipments Thank when indication where years retail of stocks

Carlos Abrams-Rivera

this Andrew, Carlos. is

first take the of so of to of that let through also, our teams start just year how testament comment. strong Let all one echo proud the managed and me the me Miguel's this a teams. resiliency and I'm is the just have

questions about they inventories, Now, do fluid. to your retail remain

of perspective a levels pre-pandemic the last And that returning service the exited next retail support the yearend levels look our recover rebuild But actually aggregate, in you the below through that is way certain higher continue volume expect recovery. of QX, XX% QX, of we're than if of we and still can was historical end began production we'll and through both we in in categories. at actual by we normal to inventory was it ago, our we recall, And that trade year. to were early If levels continue expectations is warehouse. as year the in so looks inventories year terms below our historical some the days from that with the inventory And the you year, in it a year that inventory in our we levels. to than

Now, X specific the SKUs, initiative. category the share One let constrained recovering forward service as level me improving tell and supports is increasing areas. you and implement in on to is saw, be our and focus is shelf focus X kind principles. production our key of of going power Number you this going the shelving

and to that to so you to the retailers. We with And Burger do plans a have detailed destination that collaboration And destination our can this Art customers online finally, deepen meaningful into in-store creating incremental in launch just seeing destinations breakfast and are with interruptive scale that from creating and both leverage this. already strong of we the do marketplace. innovation in-store our award-winning partnership

how levels, the level Now, pre-pandemic their to about also that inventory you exactly thing I and specifically think kind to actually that in keep about the quite will you reduction of normalize. one is to retail prior X- bit inventory fact inventory will you it's period in asked make I X-year pandemic. would about normalized. saw of say inventory if say, kind to it the retailers The difficult the of a the the levels think where mind

forward, Thank So but there's still to your that us you to for hard say that. predict, for we're do question. know it's building I that as would we room we to move continue because

Operator

from David comes Palmer with question Evercore ISI. next Our

David Palmer

a prepared first? remarks if comments and what you Maybe, those Interesting do do from can of expect What those about those? on outcomes you you. the Thank improvement to and Microsoft us partnerships bit with Google. you expect more areas what's touch in and see,

Miguel Patricio

you do that Carlos, do you answer -- question, want to please? want

Carlos Abrams-Rivera

Sure.

that that AGILE@SCALE we about about for is you if X AGILE@SCALEs our of us, we're just supporting the talked So recall, help let initiatives. us ways. really, partnership we CAGNY, to when is And was talked part doing in going me in say how

our organize structure actually flatter and And we of America, where the multidisciplinary evolve and X rule X, teams the the business lead was largest units. with instituted actually to North company. it in between in to levels and interposition sure mentioned with we only making a how throughout myself us agile the priority. and missions embed attack be leaner, First, we about and we And values

to second part allows whether it tech to able ecosystem, that to in ecosystem What that Because solutions, with in companies of the proven us is create an capabilities partnerships capture our seeing Microsoft, we also partnership those move whether up tech scale. in and it to then can for leading create to look partnership you're a accelerate to we were also to is The end-to-end accelerate allow sales efficiencies that forecast and get speed, The and marketing and getting question, Microsoft to that logistics going be consumer and to significant agile tech accuracy actually advantage. reality us structure. Google, tools allow to entire your a we're solutions end-to-end allows and to also once making because have building by between with are that, then, them at competitive a value across and leverage our it's I'm customer we to pleased we very we new we manufacturing, & the -- value this us maximize and also doing processes, it's closer areas across partnership and to efficiencies it creation. with with real-time service generates with improving sure that improve chain. that in like and in things is the look the planning, the scale information

will are to can you accelerate to those actually journey continue So we in as work partnerships to see, towards which for AGILE@SCALE. going look together we our

Miguel Patricio

technology. said just these would just Carlos partnerships go what beyond just I like that to to add

didn't make us you We as these time Well, moving and have will a we take examples that in great a solutions of have a remember, agile of business a So are ones and the to all partnerships, our announced, with and We'll partner NotCo that problems more agile plant-based the would standpoint, lot before quality, faster. become good time of examples solution the volume areas We of solve these for of line just to you bring in would innovation Simplot supply more that other a pipeline from can record and company. just company forward. develop. the that partner us we partnerships great have a eventually are products great didn't and -- with well, can quality.

David Palmer

And us shifted shifted a in that just you're the over side, you flavor spending the percent last much is give the a what or as few percent has would years? actual big of But a also, that side advertising on higher your How of spending? of or marketing sales of how digital terms and today sales what is there? picture? the anticipating percent today imagine, in -- have I

Miguel Patricio

to our these be having not not let me give to tell to year it's a you sales, in changes I either that marketing. growing, net net continues, number I are don't our a sales, want of on all how we flat precise. better intention can’t because or the brands. the sense percentage in investments continue give depending reduce This you But want is because you we investing of the with year that will

the moment, more really X/X a to called these in is know the Age speed more quality if quality quality best us our at Our I huge how than as gives would our I'm of that being very and recently, put best culture of investment about day year. marketing improvement I to renovation with about of another the much of great nowadays. that all rebranding among we of even in of makes digital say all that views, North the producing way marketing. this best marketing in are from the have, the marketing VELVEETA quality the the really own and more campaign development best but digital the investment, us changed all our of different, XX% the engaging. the communicate. at our quantity we America, have today But you we our And year. It and marketers that is they of Today, don't really, impressed the or consequences possibility X the of selected one, investment. us us saw, It of of Advertising

Carlos Abrams-Rivera

we in I have focus I just guess that investment. that that one is would changed really that Miguel's our have how into and million The while XXXX, very has increases seen more return also we which highlighted, it's proven much invested and true is be on to actually the marketing to we earned what comment media are have about Miguel focused in $XXX thing we

we and make So ROI. for impactful media that do our translating more creating that the teams improves earn campaigns showing all us us the the personalization that how generate sure is, that creativity are improved

this we the out. journey. Thank of the we're because the investment of it's investment of And but So on just putting we make, that's quality why our that amplifying effect you. not continue the work

Operator

from Our comes next America. question with Bryan of Bank Spillane

Bryan Spillane

ask not I materials commodities I on raw availability. just wanted guess about cost, to and but and so much

Given and issues, war that the being by some the caused of short the chain have agricultural of some guess, the I in supply. commodities been Ukraine, potentially, supply

availability just that as if I to bird it, exposure some seen that is competitors you Have you that issues? worried terms about, a that to in is tie have at it, -- given well, we in growth service Like, maybe, all, flu, Just on do of do could turkeys? maybe, of should having just be competitively? something raw that given smaller materials? your And up, concern end then just crop you

Andre Maciel

Thanks the here. Andre one. this question. get for I'll

materials come up yes, every side. raw So and packaging on situations the material day

And challenges have So on our the with resilience basis, have to which the I been a It be strongly. right? very out challenging. been requires recurring from team, years think of situation a these dealing demonstrating X continues for lot teams

have And we from think we the so inventories all good we thing challenges, service is, are in to first into levels. quarter, quarter. improved rebuild ever despite since pandemic great throughout have the level, a continue now the been time second trajectory Now, to the these do the able, to for and I

despite challenges through we face that. in navigate been So the that have able market, to to we the whole continue

on scale I our also definitely regard. helps think this

hedging. a maintaining very we hedging, approach we for said as disciplined before, been Regarding have

some haven't oils, we those going until a strategy mentioned, second in impacted happen conflict, to like which the commodities put what's Ukraine we been speculating also So I in of by position. trying most guess, been maintaining maintain we market. have on are grains, been the QX, consistency. to a energy, the good hedged us have And or the our to as

Carlos Abrams-Rivera

about the point chain long for because the Bryan, war. before a But material that been very day, around availability now, Every one there's is is overall. has raw the time tight, short supply

Bingham, navigate to material sense, mean, good of an just we And cheese, as every do better. with is cream that that. be day. raw of should there's that to scale shortage company think example in our I and there able a which a are I inventory -- have examples

have to And will to every companies smaller have access have day the difficulty adapt new we day, a So to business. to really that problem. every

that I think great job the sense. teams have in done a

Bryan Spillane

And is at then flu, you that bird if could a just all? touch on concern

Carlos Abrams-Rivera

Yes.

Let me touch that then. on

context. of last this And think that time. about I first, lessons you seen the before. give a insight I different have me historical have we one that we is the learned we little around, let is time this bit mean, thing from

our very so As be in Turkey of the so around, short-term poultry some this portfolio, X have been far. We've our on disruptions. portfolio dynamic we time can flexed we The to in response. past not at this the which we from kind we our it actually doing flexing we regions impacted looked years are actually had how experience address buy

that Now, seen we price is increases, have true.

and as sourcing we our so can we're that learned have is provide I we supply about lessons, in we're again, through we our So working navigate have closely and as agile that this. forward. remain reality that And retail to But in we're what order applying those to using spoke the flexing seen evolves. partners strategic Miguel go navigate we're the we past, our with portfolio will is think that situation those network

Rafael Oliveira

here. Rafa Bryan,

asked Just to you to exposure you, compliment Ukraine. to about

the it's in raw exposure For very materials Ukraine. us, it's okay, negligible, small, to

Operator

Goldman question Sachs. comes English Jason with next from Our

Jason English

slotting Thanks morning, To for me Good echo sentiment, Chris. congrats, in. the earlier folks.

on legend congrats Your escalation. the And you. will Marie, miss

forward with see closely going to Looking To forward. to more working questions have, foodservice I you great the momentum. your

Or sales X like growth Can growth And closed levels? over gave us and to of pretty all the momentum the statistics, back recovery Have majority above and on close average? growth I to are is we how the growing, foodservice, rate gap? U.S. XX% of across what of internationally. the you give that the growth? pre-pandemic driving Is much the you in think what's you COVID? blended from this

Andre Maciel

Okay.

not look, but share, are America, zone North specific gaining on numbers, growing I'm which to it's put which the list ahead both good okay? across in XX% of north across going a also So possible great. international board, trending as we And of way in to -- both, quote indicated so XXXX far, position. us also that already the going the America, in is very things be are levels, And North

Miguel Patricio

through are recent the the the would to a future. past, us -- a truly leverage to And as very excited example strategic see of launch consumers new for us. that our to test foodservice. intention sorry, a to but trade. a them channel the doing for to to it’s then to I It's from with and add them, that, that products, the sample was -- sampling keep different on transactional In comments you Today, the from it's Andre, have presentation, through with a there the we transactional way channel. very that We great the very

Jason English

Or sense. For and productivity? comment down you be commitment the But that more sure. should Makes have Is bit And lot a I SG&A unpack the efforts as spend not, unique timing the pretty of earlier be a efficiency we some percentage little sales is it on up this It's to of that on quarter? of sharply if for flat, the of? your dynamics can year-on-year. year. a the aware there appreciate ad

Carlos Abrams-Rivera

onetime the do first last SG&A, that we from having the in get a not gain quarter On repeated. year have

entire what's you're that's impairments that asking. driving much, the pretty So

Operator

Goldman next Ken question with comes JPMorgan. Our from

KenGoldman

I'm here. thank exposure help, and particular truly prior see highlight whether to some changes customers? maybe leaning and all wanted prices. other suggest the so it's displays want role. any Chris, lower at really I bit you'll from to comments. reduced as you harder are their there seeing store missed risk to consumers a in U.S., private Marie, just brands the be for Are any try retail for the label ask, curious highlighted starting if of you've And guess, just is offerings at Ann well to to to on that congratulations echo I behavioral new those to customers other efforts, recently, the Kraft via incremental in don't I you're or you're your

Carlos Abrams-Rivera

in is line So I we're let that. we reality they're with been X players. One, relatively label terms you The we in mean, private what seeing in label have tell escalating specific the increasing is past exposure. me take stronger have what cost would I low prices so branded say, in from for we are of I'll actually that the far, Heinz, their than everyone. today And private that is areas. actually Kraft the

today, exposed XX% think about portfolio of average advantage the at about label certainly private the So sure are that about versus ladder. couple puts situation. ago. making of that products of a XX% just XX%, industry us And price launching an We're versus to each we we're round XX% you years it are of of an in differentiated that number also if

of so and whole provide you'll whether and to can icon marketing solutions may brands. improve franchise we And in to also offer premium, categories So portfolio a our greater ingredient and finally, Mac, can as the to go lower flexibility, their we comprehensive to & we actually, -- that see so come an waste breadth that stay Cheese also the that And mainstream with occasion-based also then forward. product our money a so can Mac enjoy. leveraging blue change. into that better in continue our Whether less the they stay to can value box entry circumstances as family that design cost and we for have it's something with the consumers we're Easy across production it's our

very right our same of terms have. we that good So we private exposures, in label way affected being and now in of a we the are a by place seeing kind are

Ken Goldman

for to have we peaked? closer bit inflation that follow-up including are a estimate there rebound. an maybe, expect your inflation, about? to you're your then Andre, mentioned quick curves gross percentage as plateaus, understand bears but Might And is volatile, you futures have when I be you to little thinking for a some Andre. that than see expect you hedges that you margin

Andre Maciel

question. the for Thanks

taking percentage consistently this to protect And dollars to out, market margins we us. realization we right? margin we in said been to what critical run as to the tell the inflation The as through, stabilize have those is of and whole want actions before, current costs to our business, lower than our we invest is I Carlos As price the our is. pointed comes like our re-pricing Miguel can and batch expect and as at point. ability margin rate, that, you recover maintain last at

it that and strategy efficiencies, the gross in over cost mix, beyond pricing our people term, adjusted should short before, and have help better from will well variable to So that evolution, have to us as EBITDA investments to consistent that outlined fund brands, capabilities. the high margin I this recovers remain margins Remember time. is which stronger

So what seeking we here. that's are

levels, should in the So over the we So were percentage if even range. time, are the or a you recover that cannot to we go though okay? happen XX% look pre-pandemic specific I at when margin, going to time

So…

Chris Jakubik

If we one take, question. can maybe, more

Operator

Credit Our comes Moskow question Robert of next from Suisse.

Robert Moskow

also. was of down guess, little end a are peers question. you, can think the elasticity jealous more you XX% and about the year year. will lot for But -- ago. there's to think environment I where that by your volume of an this be elasticity. Chris, I is, really lot drill a And is into versus up unknowns I'm I my a production the Thanks here your congratulate question expecting of accelerate the I comment a of bit But you And

see a as me upon contingent you increase XX% demand give And it sense can what what means? environment, to obviously? in you is the really So that

Carlos Abrams-Rivera

and to levels. question, expect tell I we're elasticity is by Chris, Well, think way. forward thank closer an you for will going all the historical What of I that we increase jealous you your in

stimulus is So prices everything -- and most is gone. that know we way of the on are the up,

running we're today, Now, XX% is about to below that seeing elasticity levels. XX% historical

consumption confident rebuild as growing we about production levels. we're reason our also that retail the are is we Now, sequentially inventory

up actually That's are challenges kind continues performance. levels market we XX%, the have holding actually that many confident as historical of supply production that chain the inventory support levels. support. that we advancements, of into we rebuilding been making understand our us are So to feel below of still think our is the QX again, the about And level that it that about that why back today, share

Andre Maciel

to And Rob, that. just to add

the to be QX we production It definitely So mean right? in that doesn't XX%. XX%. So go was clear, up

to changing ramping now and in policy not get just So up inventory rebuild just okay? to are We retail to We the did level. we warehouses, are the our future. the that for our production levels at inventory

Robert Moskow

Okay.

is you're production to XX% if I that the year. up not throughout thought saying be meant. what was that So comment the going

Carlos Abrams-Rivera

QX. it's XX% Well, in

Robert Moskow

Right, just QX.

to Or volume much that's be going anything it pricing kind to end there Okay. kind to cost doesn't matter your of range, that fixed do If X% cost I X%, is think Does Last like, was your volume the U.S. retail leverage what question. year? at down. to be just down what really fixed this, in of continues the of happens leverage? so the

Carlos Abrams-Rivera

now. we inventory discussion that's Because right review are which inventories important. is we where -- right, Look, I think from, the rebuilding comes

we So being volumes level. are a down, inventory despite the recover need still to lot the produce to

COGS in fiscal fixed expect impact So this relevant we don't any from year.

Operator

with comes Growe question Chris from last Stifel. Our

ChrisGrowe

you. And to you. congratulations Chris, Thank

or reports XX years. over Just those thinking, so earnings XX

those the question, I when it put terms. I ask a just it's to So quick on could, kind want you of in volume. constraints your if supply crazy to

if much the factors. that a can of burden chart, was result say a like You basis outlined market those XX decline you a How quarter, a in share of as in that? point revenue it

Carlos Abrams-Rivera

kind of into that to The pause it's means right now, Chris. back that difficult

and of the lot of that I think variables of then, rebuilding the to supply kind inventories netted and through from constraints that. Easter shift, moving how the through addition the of shelf, in a perspective there's translated against some the

something that's we'll to circle So to you. have to try back

Chris Growe

Go ahead. problem. No enough. Fair

Andre Maciel

in impact, said the the I end low said revenue. thing last we we the it that like which is service have think right, places single-digit to improve expect the we big lose that places in at important But call, would, we we a to It's it where a we we is is improve, did, share, level continue continue we from where year. constraint market perspective last moving the And to trend of to forward right? our and mostly as but recovers. coming expect to the the did to it And

Chris Growe

And other follow-on in be would just Okay. one quick relation to pricing.

productivity caught savings announced? this would you've pricing lot with it's based the level along pricing more you be -- savings got productivity you to pricing account you of be Are place? of a in enough pricing, along the that you had to inflation on for up with quarter. once as the with now coming When well, second believe have of currently sort You inflation through the going in do offset

Andre Maciel

little are have increasing they the even seeing guidance we been curves, that provided, contemplating seen. taking We by actions the expect inflation we And the a have have that that bit forward the since -- in We you the been we way, are which, inflation the peak. in with have already

of a right on that starts of So now, in will to of of end year, with price our will inflation. year-over-year inflation. year-over-year rise our our the still to but be you, graphs little bit the inflation -- the a last provided at are ahead Obviously, base, be catching as we up price ahead

Chris Growe

Okay.

Okay. that color. Thank you for

ChrisJakubik

thanks, for us joining Great. Well, today. everybody,

Miguel Let remarks. closing a to for couple it turn me back of

Miguel Patricio

to I at a opened saying that that exciting you today's Kraft let call way. tell Heinz, and why be we it's think me time very

through tomorrow. able all over X uncertainties not we've And the proud last are First, we the much navigate a been this. moments at in the are that's we that because same very better easy like time years, building to

-- in today. very are a We company different company very a

much more growth-oriented. We are

today, and portfolio about put focused, our business more to and just have bigger mix, improved have profitable. is profitable in than you XX% and Elevation of where are our Taste perspective, give growing, to we McCormick, and We big we an and today. the just And it working, example. platforms It's it's just

double-digit growth have emerging sales net consistent markets. We in

Our an business are very in the to across now different. delivered more billion standpoint, us place, think these accelerate will in marketing companies And we and previous is a is terms because foodservice efficiencies. mean, much years of in we and really, we about better partnerships these but distribution with strong $X brands year marketing talked the and that not our profile much better growth of gross so growing. board, I when X help that efficiencies a ago, in in doing efficiency from job, I investing that last the and are we From the year on technology savings supply, and only

standpoint. very think I we financial different a have flexibility from that situation Finally, a

had combined XXX%, continue that we in can us put course, powerful discipline the of of with X scale our of rate in with of years. And in back lot in is, business investment and record pricing. more All and to the look a discipline a a acquire when much conversion just last we'll be capabilities generating grade, forward, at and going X years, flow in With free the we time, cash will portfolio.

at you. why it's to this Thank be at that's moment exciting Kraft working So Heinz.

Andre Maciel

Thank you, Chris. Thank you, Chris.

You're pretty good.

Operator

Ladies and gentlemen, does presentation. this today's conclude

a day. wonderful disconnect, now may have You and

The Kraft Heinz Company (KHC) 27 Apr 222022 Q1 Earnings call transcript